Coinbase Shares Drop as Crypto Winter Takes Toll on Exchange's Trading Volume

The company faced earnings headwinds, although prices have stabilized recently and the company just struck a deal with BlackRock.

AccessTimeIconAug 9, 2022 at 8:32 p.m. UTC
Updated Aug 9, 2022 at 9:04 p.m. UTC

Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.

Shares of Coinbase Global (COIN) fell about 5% after the cryptocurrency exchange said trading volume dropped substantially during the second quarter.

Customer trading activity amounted to $217 billion during the period, down from $309 billion in the first quarter of this year, according to a shareholder letter released Tuesday. Coinbase's overall revenue came in at $803 million, missing the average analyst estimate of $873.8 million, according to data compiled by FactSet.

Coinbase's stock has plunged since its IPO last year as the crypto and equity market rout prompted a slowdown in retail trading, forcing the company to slash jobs and focus on controlling costs. Even amid the current crypto winter, though, Coinbase continues to press ahead toward its goal of being a one-stop shop for crypto trading. Last week, it announced a partnership that lets customers of BlackRock – the world's largest asset manager, with $10 trillion – trade crypto through Coinbase.

"While we do not take a decline in trading volume market share lightly, the shift in Q2 trading volume to high volume retail traders, market makers, and high-frequency trading firms did not translate into a corresponding revenue impact for Coinbase, as these customers trade high volumes but generate low fees," the company said.

Wall Street analysts weren’t expecting fireworks in the last quarter from Coinbase, though cryptocurrency prices have stabilized recently, which may lead some to ponder whether the second quarter marked the low point for the crypto exchange.

"Q2 was a test of durability for crypto companies and a complex quarter overall. Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program," Coinbase said.

The exchange posted a net loss of $1.1 billion during the second quarter, versus the $430 million loss in the first quarter. In addition, Q2 adjusted Ebitda was a loss of $151 million compared with a gain of $20 million in Q1.

Coinbase said results were "heavily impacted by non-cash impairment charges" stemming from crypto and venture investments.

On the SEC securities inquiry, Coinbase said it's unsure whether or not it will turn into a formal investigation. "[We are] committed to productive discussion with the SEC about crypto assets and securities regulation, and to working alongside all policymakers to build a workable regulatory framework for the crypto-economy that addresses any areas of risk, while enabling the development and adoption of digital innovation for the benefit of the broader society."

Update (Aug. 9, 20:47 p.m.): Updates with additional details from earnings release.

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Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.

CoinDesk - Unknown

Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.